The Top 3 Tips For Foreign Entrepreneurs Starting Up In China

This post is part of our series Say Hello To China’s Expat-preneurs, where we will talk to a mix of foreign founders who have tackled China’s growing tech space and won. Stay tuned over the coming three weeks as we talk to foreign founders from Beijing to Shenzhen about what it takes to thrive in China. You can follow our updates at @technodechina, or check back here for new stories in the series.

It’s no secret that international startup hubs are beginning to eye China as a competing home for world-class entrepreneurs. It’s the holy grail of consumer pools, with a collection of manufacturing mega-cities in its back pocket. 

But exposing your company to Chinese consumers can be a very challenging task. At Technode, we have great expat-preneurs knocking on our doors every day, which is why we’ve chosen to take a closer look at China’s foreign founders, and find out what it really takes to succeed in the middle kingdom.

For successful entrepreneurs in later-stage, established companies it’s often easy to forget some of the headaches of market entry. So before we launch into our profile series on some of China’s more established expat-preneur success stories, we wanted to first take a quick look at what relative newcomers are up against, as well as their their top tips for breaking the ice in the Chinese market.

1. Find A Local Partner (Or Incubator)

Darren Camas, founder of digital payments company BitNexo, was previously a Chile-based entrepreneur. He was browsing China opportunities out of curiosity when he came across the Shanghai-based Chinaccelerator program, that hosts up to 70% foreign startups. He ended up successfully applying for Batch 7, and didn’t hesitate in packing up his life and moving halfway around the globe.

Having the support of an accelerator is a very handy entrance point for foreign founders, even if it’s not absolutely vital. China’s business ecosystem relies heavily on interpersonal connections, which can make early funding tough on your own.

“You will have a lot of assumptions that will be crushed within a short time,” says Darren. “I’m lucky to be part of Chinaccelerator program which not only offers financial assistance, but a network of amazing mentors, faculty, and other entrepreneurs who are helping us through this process.”

Putting aside the strange and complex world of China business dealings, simple logistics can pose a frustrating challenge for foreign founders. Not having a residential ID means that basic services including online marketplaces are incredibly difficult to access, and language barriers are far more troublesome than in Southeast Asian markets.

“As a foreigner it is very hard to get set up with an account on Taobao and often the manufactures we want to communicate with speak very little English,” says Avery-Anne Gervais, CEO of CLAWZ, a 3D-printed jewelry company currently seeking their A series. “We have now hired a Chinese office assistant to help us out a few hours a week and things are moving a lot smoother now.” 

2. Don’t Confuse Market Size For Adoption Speed

For those who’ve worked on startups across various global markets, the sheer number of the Chinese market can tempt you drop what your doing and book the first ticket east. In a country of 1.3 billion, it’s not unheard of for a startup to run in beta with a 5-million-strong test crowd. As attractive as that might seem however, it’s certainly not common. Even with a local partner or incubator, deals can move a lot slower than you might like. Also, it’s common – almost universal – for local startups to fudge their customer numbers, meaning that impressive digits mightn’t have the same impact with potential investors that you’d expect back home.

CLAWZ CEO Avery told Technode that “time is probably the most important, because you can’t rush business in China. It just doesn’t work that way. And because things can take a lot longer than anticipated, you’re going to need some serious patience.”

If you’re working in tech that is easily reverse engineered, you may also have to factor in copycats or legitimate companies working in a lower price range. The fact that the market is big may increase your potential consumer base, but it also has led to the creation of huge, interconnected online marketplaces that make local production and distribution of similar products a breeze.

“Women in China fit our target market very well, and the sheer population of China helps to grow those numbers,”says Avery. “However, the biggest threat we face is our product being reproduced as a knockoff. We plan to mitigate this risk by producing a very high quality product which could easily be differentiated from fakes.”

3. Learn the Language and Culture, And Hire Local

It’s a no-brainer. Unless you have a hasty exit strategy or your China operations are purely manufacturing, getting a grip of the language and culture is vital. And the same goes for most industries in China. Unlike Hong Kong, Singapore and Southeast Asian markets, language is a requisite for a large part of any business, and you shut out a wealth of opportunities by trying to work around it. Similarly, you won’t have much luck transplanting most foreign tech products or models into China, so studying the culture and consumer behavior is a vital step in starting up.

Jaeyoung Jang, CEO of Seoul-based travel website ZaiSeoul, chose to set up an office in Shanghai to liaise with their head of operations in Seoul. Despite already having an established base, he found the move into China very similar to a startup. He picked a lean team of just five Chinese staff, all whom had previously been customers on his site. Within his first 6 months in China, he says he packed his days with two-hour Mandarin conversation practice.

“It won’t be as fluent as [the Chinese] mother-tongue, and it takes more time for me to understand people inside and outside of the company,” he says. “However, I think learning Chinese and the culture is the first thing you should do when expanding into the market. Then, hire a trusted Chinese partner and a Chinese team.”

Feel free to reach out to English editor @catecadell for feedback or to suggest a great China expat-preneur story. You can also follow our contributing reporters @evayooare and @emmalee12345 for updates.

Check out our rundown on China’s tech ecosystem and foreigners here. In our next post, Emma Lee delves into the world’s fastest growing education-tech market when she talks with foreign founder Kevin Chen from Italki.

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